Strata Title Investment Property | Tax & Property Depreciation Schedule

Strata Title Investment Property


This article was provided by
Simon Harris – Managing Director of National Buyers Agency, Providence Property Group

When buying property, the title is the place to look for the essential details pertaining to what you are actually going to own if you make the purchase and any conditions you need to be aware of. If you’re in the market for an apartment, unit or townhouse, the property you consider may have a strata title. Understanding what a strata title property is and what it means for you as a property owner is a must, so let’s get the facts.

What Is A Strata Title?

Any property you purchase will have a title, and a strata title is simply a type of title that is very common in Australia, especially when it comes to units, apartments, and townhouses. In fact, any property that has shared space.
Interestingly, the concept of strata titled property is an Australian-designed scheme. It has been widely celebrated as a property innovation and proven so effective that it has been replicated in countries across the world.

Own Your ‘Lot’ Plus A Bit More

If you purchase a property with a strata title, you not only own the ‘lot’ that is your apartment, unit or townhouse, but also a share of the building’s common areas too.
Put it this way — you’ll own a portion of a larger dwelling rather than a freestanding dwelling. You (unless stated otherwise) own the internal walls, ceiling, fixtures, carpet, courtyard, airspace and anything within the airspace of your purchased lot. You will also share ownership of the common property areas. This can include the driveway, parking area, gardens, lifts, stairwells and the external building such as roof and walls.

Strata Lets  You Share The Expense Of Upkeep

As part of owning a strata title property, you’ll likely contribute a levy to an owners’ corporation (body corporate for example), enabling all owners within the strata scheme to share the expense of the upkeep. This means that when it comes to maintaining gardens, the building, the driveway and other common areas, you will split the costs with others.

Worried about disagreements with the other title holders on what needs to be done and when? Most owners’ corporations have a fair process for decision making and for dispute resolution that keep things from escalating so ask about the owners’ corporation rules and regulations prior to purchase if you have concerns.

An additional benefit of strata properties that should be considered is this: your insurances for strata properties are usually lower. Why? Because many of your property’s maintenance and repairs will be cared for through a sinking fund that can be used for regular repairs and other unforeseen events.

Why You Could Benefit From Investing In Strata Titled Property

A strata titled property can be a valuable addition to your investment property portfolio or make an excellent place of residence. Due to a lack of understanding for the most part, some people can be a little hesitant to purchase a strata titled property, but this can work in your favour, allowing you to snap up a great piece of property to invest in. And strata titling won’t have any effect on your rental yield, so a strata titled property can be a lucrative long term investment.

Investing in a strata titled property may also help to reduce your tax bill at the end of the year. Most property investors know they can claim depreciation on the property as a tax deduction. What many are surprised by is that depreciation deductions for an apartment are often higher than a much larger house.

As we mentioned above you own a portion of the common areas. That means you’re not just entitled to claim depreciation on your apartment itself, but also the portion of the common areas. These common areas could amount to several hundred thousand dollars or more. Especially in upmarket highrise developments. Nothing to be sneezed at.

Frequently asked questions about Strata Title Property ownership

Can I Renovate?
You can renovate your strata titled property. Assuming your changes are within the guidelines of your owners’ corporation rules and regulations, it should be as simple as notifying the owners’ corporation and gaining approval from the majority.

Will There Be Ongoing Expenses?
You will likely pay an annual owners’ corporation levy or strata fee, however this is often money that you would have ordinarily paid for maintenance of your property’s grounds anyway.

How Much Will Strata Fees Be?
This can vary but it’s important to consider what the strata fees will cover. For example, Providence will not recommend a strata property if the strata fees cannot be justified by the included amenities.

What Do I Need To Consider Before Purchasing A Strata Title Property?
Exercise due diligence and look into the levies you would need to pay, any works currently planned or underway and by-laws that might affect you such as rules around parking or noise.

Disclaimer: This article does not take into consideration your personal circumstances or a particular property, it is general in nature and should not be considered as advice.

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